Philex Mining Corporation vs. Commissioner of Internal Revenue

decision

of the Supreme Court as well as the particular provision of Sec tion 5 o£ Republic Act No. 1435 as bases £or claiming a refund. The issues brought be£ore this Court are: 1.

Whether or not the privilege under Section 5 of Republic Act No. 1435 had been repealed by Presidential Decree No.

231 <Enactment o£ the Local Tax Code>, as amended by Presidential Decree No. 426 and by Presidential Decree Nos.

1158 and

1158- A

<Consolidating and Codi£ying all Internal Revenue Laws> particularly Section 342 o£ the National Internal Revenue Code o£ 1977; and 2.

Granting arguendo that the pr ivilege under Section 5 o£ Republic Act No. has not been r epealed, ~hether o r not petitioner is entitled to the refund claimed absent any allegation o£ payment o£ the additional tax imposed by the municipal boards · or councils as prescr ibed by Section 4 o£ Republic Act No. 1435.

649 .

j ·l - D E C I S I 0 N -

- 6 - Taking the £irst iss ue, respondent stressed that the · subsequent enactment o£ various Presidential Decrees and Executive Orders, increasing the rate o£ speci£ic taxes under the National Internal Revenue Code, impliedly revoked the partial re£und privilege under Section 5 o£ Republic Act No. 1435.

He stressed that the very purp os e why the government increased the rates o£ speci£ic taxes is to provide additional revenues to accelerate economic development in the country.

The grant o£ partial re£und would there£ore run counter to the very purpose £or which the speci£ic tax rates were increased. We disagree with the respondent. In the case o£ Coa•issioner of Interna1 Revenue v.

At1as Conso1idated /lining and Deve1opaent Corporation, et.a1., G.R. No.

93631, November 12, 1990.

the Supreme Court, in a Resolution by the Th i rd Divi sion, had the occasion to rule that "the purpose £or the increase in the rate o£ tax cannot in anyway negate the policy beh i nd the grant o£ partial re£und. The Court sees no inc onsistency between the increase in speci£ic tax r ates and the retention o£ the re£und pr i v i l ege .

I n £act, with the increased· s peci£ic 600 .·' ·l - D E C I S I 0 N -

7 tax rates, the grant of partial refund to mining at1d lumbet~ c oncessionaires ,is made more impey•ative considering that they seldom use the highways, the cons t t~ uct ion financed by specific taxes."

Going ovet~ the second iss•.te, t~e s pond ent ' argued that petitioner is entitled to a refund only if the additional specific taxes imposed by the municipalities and cities concerned have been paid. He pointed that where there is no StiCh imposing an additional specific tax to miners and forest concessionaires, no refund could be availed of as perceived from a reading of the provisions of Sections 4 and 5 of Republic Act 1435. We find appropriate the following comments of the Supreme Court in the case of Co••issioner of Internal Revenue v. Atlas Consolidated Mining and Develop•ent Corp., et. al., <supra). of the legislative pt~oceedings leading to the enactment of RA 1435 shows that mining and lumber concessionaires were granted of specific taxes because the ci.nd f ue l they consume are mo stly used wi t h in the r own co mpo unds and roads. RA 1435 gave th es £: c o11-:: .• ss io n ;:d.·,.-··es Y' e lief, in the fot~ m of a tax 651 :.~ ··, j ·l - D E C I S I 0 N -

.. , - 8 - refund, since their trucks and vehicles seldom ply the national highways, the construction o£ which is £unded by the speci£ic tax collected by the .

national government.

There is there£ore no · rationale in conditioning the . grant o£ re£und on the payment o£ these mining and lumber concessionaires o£ any additional local tax. " And in the more recent case o£ Coaaissioner of Interna1 Revenue

v. Rio Tuba Nicke1 nining Corporation and Court of Tax Appea1s, G. R.

Nos.

83583-84.

September 30, 1991 <202 SCRA 137), the Supreme Court Third Division held: "<t>o our mind, the proviso in Section .5 standing above is enough basis for the grant of refund xxx. In fact, the entire proviso of Section 5 does not even make any reference to Section 4 which empowers municipalities and cities to impose the additional tax on oils . sold or distributed within their territorial jurisdiction. What is clear therein is that the Revenue Commissioner shall refund 25X of the specific tax whenever any oils mentioned above r e used b ~ miners or forest concessiona i r es in t hei r oe r a t i ons and the procedure fo r r e f nd is comp l iec with . . , 652 ·~ ·I

-DEC IS I · O N -

- 9 - Finding for the petitioner, the only thing left to be determined by this Court is the amount of specific taxes to be refunded by respondent Commissioner of Internal Revenue in favor of petitioner.

Petitioner claims that it is entitled to the 25X partial refund of specific taxes paid from its purchases of refined and manufactured fuel oils, diesel fuel oils and lubricating oils from July 1, 1980 to December 31, 1981 in the total amount of ~623,169.30. However, in its Memorandum, petitioner included in its claim for refund purchases of fuels from July 1980 to April 1982. A table showing purchases of Diesel, Regular Gasoline and Industrial Fuel from July 1980 to April 1982 was presented by pe titioner. The amount now being claimed as 25X r e fund on specific taxes paid is ~1,728,542.78 instead of the original ~623,169.30. Respondent argued that specific taxes paid prior to November 16, 1980 had already prescribed. The Tax Code provides for the judicial remedy of filing a claim for refund within a period of two <2 > y e ars from the date of payment of the tax purs uaD· t o t he p r ovisio of Section 230 <f ormerly Sectio n 29 2>.

653 - D E C I S I 0 N -

.·, -- 10 ·-- Section j ·-· c:· .,:j:...J of the Tax Code insofar~ as per·-t in ent provides that specific taxes on locally levied und et~ Sections 155 and 156 of this title, excegt paid within fifteen (15) days from the date of removal thet' eof f r~ o m t h e p l a c e o f p r·' o d u c t i o n • " It is therefore evident that the manufacturer of petroleum products has up to 15 days date of its removal within which to pay the specific taxes on locally manu fact ttt'ed pett~oleu m products.

As an exception , manu fact Ut' ers of 1 ubt' icat i ng oils and gr--ease have to pay the specific tax collecte d from the purchaser on the r date of their removal from the place of production. Petitioner·' ptJr'chased both manu fact Ut' ed petroleum products and lubricating oils and grease. Thus, with respect to it s purchases of lubt'icat ing 0 i 1 s, the specific taxes paid thereon deemed paid at the date of its removal. The claim fot' r--efund of the 25':/.

specific taxes paid on oils a 1d l 4 bricants purchased and de li ver e d pt' i Ot' t o N vem brn' l b ,

1. 9E!O had indeed pr--esc t'i b e d . [Exhs.

AD t c> AP, B 1~1 t o BU , D t o Y ;

s e ~? f o 1 d r' 7 , 2 r' e :;, p e r· t j v P l y J • 654 - D E C I S I 0 N -

- 11 - All claims not included in the claim for ~efund filed in the administrative level <BIR> cannot be the subject of the present appeal. Thus, purchases of petroleum products and lubricants made after December 31, 1981, not being included in the claim for refund filed with the respondent's office, cannot be considered by this Court for the same was not included in its claim for refund with the BIR nor of this petition for review.

The petition calls for the refund of 25Y.

of the specific taxes paid on petitioner's purchases of manufactured oils and fuels from July 1, 1980 to December 31, 1981 and not purchases of fuels from July 1, 1980 to April 1982, as prayed for in the Memorandum.

Following the provision of Section 135 of the Tax Code, the specific taxes paid on the rest of the petroleum products purchased by petitioner falls due on the 15th day following the date of its removal.

Therefore, all shipments of petroleum products, except oils and lubricants, purchased by petiti oner 15 days piior to November 16, 1980 or o n No ve mber ~ 1980 are paid on N v e b£, 16, 1 980 which is well withi n t h e t wo-year pre c 1int ive per iod as prescribed und r Sect i on 230 655 - D E C I S I 0 N -

.·, -· 12 ·- of the National Internal Revenue Code. The specific taxes collected from petition e~~ on its purchases of petroleum products other than oils on Novembe~~ 1, 1'380 sho uld have been paid within 15 days the date of its on Novembe~~ 16, 1'380.

It follows that on November' 15, all put~chases of locally manufactured petroleum products, except 0 i 1 s' on Nove m b.et~ 1' 1'380 were deemed paid.

Thus, all of fuels priot~ to November' 1, 1'380 have pt' e scr·' i bed.

It should be not eel that in the case of Commissioner of Internal Revenue v. Rio Tuba Nickel Mining Corporation and Court of Tax Appeals, supra., the Supreme Court' s Third Division granted Rio Tuba's Motion for Reco n sideration of its de c ision dated September~ 30 , 1 r::3'31.

The Supr~ eme in it s Resolution, dated March arrived at the following conclusion, to wit: " S i n c e t h e p r·' i vat e t ' e s pond en t ' s clai m for refund covers sp•cific t axes p a i d f rom 1980 t~ July 1~83 the n we f in d ! h a t the private r~spon de nt i s f~t itl~d to a refund. ·It sHoul d be ma de · a r~ ,.

h ovH:> ver~, that fHo l: uba i !;

•• o t ~,ti t l ed t o t he whole a~ou ri t i t cl 2, ms a''· t"'e fiJn d.

656 - D .E C I S I 0 N -

- 13 - The specific ta xes on oils which Ri o Tuba paid fo r the afo r ~said period were no longer based on the rates specified by Sections 1 and 2 of R.A.

No.

143 5 but on the increased rates mandated under Sections 153 and 156 of the National Internal Revenue Code of 1977.

We note, however, that the latter law does not specifically provide for a refund to these mining and lumber companies of specific taxes paid on manufactured and diesel fuel oils. In Insular Lumber Co. v. Court of Tax Appeals, <104 SCRA 710 [19811>, the Court held that the authorized partial refund under Section 5 of R.A. No. 1435 partakes of the nature of a tax exemption and therefore cannot be allowed unless granted in the most explicit and categorical language.

Since the grant of refund privilege must be strictly construed against the taxpayer, the basis for the refund shall be amounts deemed paid under Sections 1 and 2 of R.A. No. 1435. ACCORDINGLY, the decision in G.R.

Nos.

83583 - 84 is hereby MODIFIED. The private respondent's CLAIM for REFUND is GRANTED, computed on the basis of the amounts deemed paid under Sections _1 and 2 of R.A. No. 1435, without interest.

-DECISTION -

- 45 - % manufactured ocils, said position that a partial refund would be inconsistent with the purpose of the subsequent laws increasing specific tax rates is without merit.

The refund privilege is not inconsistent with the increase in specific tax rates since the refund is based only on the eriginal rates pravided in Section 1 of RA 1435. These subsequent laws did not, therefore, expressly or impliedly, repeat the refund privilege.

HAN XA xXAX The Court, after examining the invoices offered by petitioner as evidence, arrived at the following computation as follows:

QUANTITY IN LITERS

=—-— S| See re oO =—_ Se re re Oil and Extra Regular Diesel Lubricants Gasoline Gasoline Fuel G11 Grease Folder #1 = 1, 419, 300 44,646 28, 000 62,000 352,000 200 Folder #2 472, 000 3, 220 9, 000 33, 000 54, 000 200 Folder #3 = 1, 449, 000 93, 828 39, 000 80,000 708,000 2,300 Folder #4 31, 000 14, 200 = i 7 = Folder #5 209,000 148,636 11, 000 16, 000 84,000 21,410 Folder #6 5, 000 76, 960 2 - = 4,920 Folder #8 - 133, 550 - 7 . - Folder #9 - 13,020 - . - See Annex "A" for detailed computation of quantity.

659 - D E C I S I 0 N -

- 16 - Petitioner's exhibits particularly £ound in Folder #7 ~as not included in the computation on the ground that it has already prescribed. The Resolution oi the Supreme Court dated March 25, 1992 iD the Rio Tuba case <supra) stated that the claim Ior re£und oi speciiic taxes should be computed on the basis o£ the amounts deemed paid under Sections 1 and 2 oi R.A. No. 1435, without interest.

Sections 1 and 2 OI R.A. No. 1435 inso£ar as pertinent provides.

"SECTION 1. Section one hundred and Iorty - two oi the National Inter nal Revenue Code, as amended, is £urther amended to r ead as Iollows: "SEC.

142. Specific Tax on manufactured oi1s and other fue1s On reiined and manu£actured mineral oils and motor £uels, there shall be collected the £allowing taxes: (a) XXX XXX XXX (b) Lubricating oils, per liter OI volume capacity, seven centavos;

(c) Naptha, gasoline , and all other similar products o£· distillation, per liter o i v o l u me capacity, eight centa v os; and (d ) XXX XXX

X XX

66 0 - D E C I S I 0 N -

- 17 - "SEC.

2. Section one hundred and forty - five of the National Internal Revenue Code, as amended, is further amended to read as fallows: SEC. 145 Specific Tax on Diese1 Fue1 oi1.

On fuel ail, commercially known as diesel fuel ail, and an all similar fuel ails, having mare or less the same generating power, there shall be collected , per metric tan, one peso. "

With respect to the amount refundable an purchases of diesel and industrial fuel, bath parties agreed and arrived at a formula, in c onverting liters of diesel and industrial fuel to metric tans.

The base far computing the amount refundable far specific taxes paid an diesel and industrial fuel should be that as prescribed in Section 2 of Republic Act No. 1435. The formula to convert liters to metric tans of diesel and industrial fuel as agreed upon by the parties is: No.af liters x Specific Gravity Metric Ton 1,000 It was further agreed that the specific gravity of diesel is 0.8429.

While the specific gravity of industrial fuel is 0.9439. 661 . ,\ ...

- D E C I S I 0 N -

.·, - :I.B - Thus, the total number of liters of diesel subject ·to t·'efund is 3,585,300 equivalent to 3,022.04937 metri c tons , computed as follows: 3,585,300 liters of diesel x 0.8429 = 3,~04937 Metric Tons of Diesel 1,000 and the total number of liters of industrial fuel subject to refund is 1,198,000 equivalent to 1,130.7922 met ric tons , cbmputed as follows: 1,198,000 liters of industrial fuel x 0.~39 = 1,130.7922 Metric Tons of Ind. Fu~l 1,000 After having converted the liters of diesel and industrial fuel into metric tons, the Court can now compute the amount to which petitioner is entitled to be refunded on the specific taxes paid from the u se of petroleum products ptn~ cha sed fat~ the pet'iod covet·' ing ,Jt . .\.ly 1, 1980 to Decembet~ 31, 1981.

Petitioner is therefore entitled to the amotJn t of ~16,747.36 co mputed by the Court, as 662 - D E C I S I 0 N -

··, - 19 - Refundable Aaount of 25% Specific Taxes On Regular Gasoline Oils l lubricants, Diesel and Industrial fuel Oil Purchased fro• July 1, 1980 to Dec. 31, 1981 Per Court's Coaputation based on Sees. !. and~ of RA 1435 Diesel Oils and lubricants Extra Gasoline Regular Gasoline Fuel Oils Grease T 0 T A l Quantity 3,022 IH 528, 062 Lts.

87,000 lts.

211, 000 lts.

1,131 KT 29,030 lts.

Specific Tax Rate

1. 00/KT 0.07/lt 0.08/lt 0.08/lt

1. 00/KT 0.07/lt Percentage refundable under Sec. 5 of RA 1435

AIIOUHT REFUNDABLE

Aaount Paid p 3,022.00 36,964.34 6,960.00 ' 16,880.00 1, 131.00 2,032.10 p 66,989.44 25% p 16,747.36 ============ As regards the 201. interest per annum being claimed by petitioner, the rule is that no interest on refund of tax can be awarded unless authorized by law or the collection of the tax was attended by arbitrarine ss. [Go11ector v.

Prieto, 122 PhiL 907;

Commissioner v.

Asturias Sugar Gentra1, 2 SCRA 1140;

Commissioner of Interna1 Revenue v. American Rubber Go., 18 SCRA 842; At1as Ferti1izer Corporation v. Commissioner of ' Interna1 663 . ·" - D E C I S I 0 N - - 20 - Rev~nue, 100 SCRA 556; She11 Phi1ippines, Inc. v.

Centra1 Bank of the Phi1ippines, 162 SCRA 628. l An action is not arbitrary when exercised honestly and upon due consideration where there is room for two opinions, however much it may be believed that an erroneous conclusion was reached.

[F. B.

11oreno, Phi1ippine Lar Dictionary <3rd ed. >,

p. 69, citing Imperia1 Deve.lopment Corporation v.

An over, 08473- AP, August 23, 1979.]

Arbitrariness presupposes inexcusable or obstinate disregard of legal provisions. [Victorias 11i.11ing Co., Inc. v.

Commissioner of Interna1 Revenue, et.a1., 19 SCRA 430. ]

None of the exceptions are present in the case at bar.

Respondent's decision denying petitioner~s claim for for refund was based on an honest interpretation of law. We, therefore see no reason why petitioner should be entitled td the payment of interest.

Moreover, the Supreme Court held in the Rio Tuba case that no interest shall be charged in computing th~ 25% refund on specific taxes paid.

[See Supreme Court Resolution dated Mar ch 25, 9 92 . ]

ln t h e s a me manner, petitioner' s pray r for ost of s u i t c a nnot be awarded.

I t i s an 664 ·~ - D E C I 5 I 0 N -

...

- 21 - elementary rule that the government shall not be . liable £or basts of suits unless otherwise provided by law.

£Section 1, Ru1e 142, Revised Ru1es ox Court; Co11ector ox Interna1 Revenue v. Convention ox Phi1ippine Baptist Churches and the Court ox Tax Appea1s, 2 SCRA 10.1

WHEREFORE, the respondent, COMMISSIONER OF INTERNAL REVENUE is hereby ordered to REFUND in favor of petitioner, PHILEX MINING CORP., the sum of ~16,747.36 without interest, equivalent to 25X partial refund of specific taxes paid on its purchases of gasoline, oils and lubricants, diesel and fuel oils pursuant to the provision of Section 5 of Republic Act No. 1435, in relation to Section 142 (b) and <c > of the National Internal Revenue Code and Section 145 as prescribed under Sections 1 and 2 of R.A. 1435.

No pronouncement as to costs.

WE CONCUR:

- 22 - res,iding Ju;ne ~ ~!:-!.~~ RAMON rf:" •DE V Associate Ju CERTIFICATION L I hereby certify that this decision was reached after due consultation between the members of the Court of Tax Appeals in accordance with Section 13, Article VIII of the Constitution. 668 ~Q.-~ ERNESTO D. ACOSTA Presiding Judge Court of Tax Appeals